BorgWarner's Q4 Earnings Beat Expectations, Revenues Rise Y/Y

Core Insights - BorgWarner reported adjusted earnings of $1.35 per share for Q4 2025, exceeding the Zacks Consensus Estimate of $1.16 and up from $1.01 in the prior-year quarter, driven by strong performance in the Drivetrain & Morse Systems segment [1] - The company achieved net sales of $3.57 billion, a 3.9% year-over-year increase, surpassing the Zacks Consensus Estimate of $3.51 billion [1] Segment Performance - Turbos & Thermal Technologies: Net sales were $1.4 billion, slightly down from $1.41 billion year-over-year but above the estimate of $1.39 billion. Adjusted operating income decreased to $198 million from $223 million, missing the estimate of $217 million [2] - Drivetrain & Morse Systems: Net sales increased to $1.41 billion from $1.35 billion year-over-year, exceeding the estimate of $1.37 billion. Adjusted operating income rose to $271 million from $240 million, surpassing the estimate of $261 million [3] - PowerDrive Systems: Sales grew to $623 million from $525 million year-over-year, exceeding the estimate of $590 million. The segment reported an adjusted operating income of $28 million, a significant improvement from a loss of $14 million in the same period of 2024 [4] - Battery & Charging Systems: Sales decreased to $149 million from $162 million year-over-year but exceeded the estimate of $132 million. Adjusted operating income improved to $2 million from a loss of $14 million in the corresponding period of 2024 [5] Financial Overview - As of December 31, 2025, BorgWarner had $2.31 billion in cash and equivalents, up from $2.09 billion a year earlier. Long-term debt increased to $3.89 billion from $3.76 billion [6] - Net cash provided by operating activities was $619 million for the quarter, with capital expenditures totaling $162 million and free cash flow at $470 million [6] 2026 Guidance - For full-year 2026, BorgWarner anticipates net sales between $14.1 billion and $14.3 billion, compared to $14.32 billion in 2025. Adjusted operating margin is expected to be between 10.7% and 10.9%, consistent with the 10.7% margin in 2025 [7] - Adjusted earnings per share are projected to be in the range of $5 to $5.20, up from $4.91 in 2025. Operating cash flow is forecasted between $1.6 billion and $1.7 billion, compared to $1.65 billion in 2025. Free cash flow is expected to be between $900 million and $1.1 billion, down from $1.21 billion reported in 2025 [8] Market Position - BorgWarner currently holds a Zacks Rank of 3 (Hold). Other better-ranked stocks in the automotive sector include Modine Manufacturing Company (Zacks Rank 1), Strattec Security Corporation (Zacks Rank 1), and PHINIA Inc. (Zacks Rank 1) [9][10]